The financial industry looms
large in the coming primary – and some bankers say they’ll push for the Vermont
senator even if his policies could hurt their careers
A few months ago, Democratic
party leaders attended a meeting in New York with some of
the titans of Wall Street, among them heads of brand-name hedge funds and top
private equity firms. The gathering was billed not as the usual high-dollar
fundraiser but as a bridge-building exercise in which powerful financiers could
vent their opinions privately to Democratic bosses.
Two US senators who formed
part of the Democratic delegation kicked off the meeting by inviting the
financiers to air their concerns about party policy. One of the big name Wall
Street figures stood up, proclaimed grandly that he was speaking on behalf of
every financial person in the room, and then slammed into the Democratic
lawmakers for having had the audacity even to consider disbanding a low-tax
arrangement popular with hedge fund managers known as “carried interest”.
“That was startling to me,”
said one of the other financiers present in the room that day. “Here was a
gathering of Wall Street’s greatest minds and what were we discussing? Not how
to generate more jobs or create an economy that works for everyone, but how to
protect our vested interests and tax advantages.”
Let’s call the financier
speaking here by the false name Frank. He is one of a rare and fascinating
breed which Politico has dubbed Bankers
for Bernie – high-profile Wall Street figures who, unlike most of their
peers, are prepared to abandon pure self-interest and embrace the radical
financial reforms espoused by Bernie Sanders.
Even Asher Edelman, one of the
real-life templates for Gordon “greed is good” Gekko of the 1987 movie Wall
Street, has joined the club, writing
in the Guardian that only Sanders is “committed to honest solutions” to the
crisis of income inequality.
The fact that Frank – a
prominent New York hedge fund manager – is only willing to talk to the Guardian
anonymously itself tells a story. It’s not that he’s ashamed about his backing
for Bernie – quite the contrary: he has openly canvassed for Sanders in Iowa
and frequently goes out leafleting for him in New York City. Rather, Frank’s
desire to keep his name out of the news was a reflection, he said, of the
stultifying consensus within the New York financial world that Sanders’
proposals to rein
in Wall Street and prevent another Great Recession are dangerous and must
be rebuffed. He looks at his fellow hedge fund folk, and thinks to himself that
“they have made so much money, yet all they want to do is preserve what they’ve
got. It’s got so out of whack that virtually nobody is willing to think about
the basic unfairness of income inequality or how to improve the economy.”
Since Sanders
launched his run for the White House last May, the senator from Vermont has
dragged finance reform from the margins of political debate to the center of
the Democratic presidential stage. Now the issues that he cares most deeply
about – banks that are “too big to fail”, Wall Street financiers who are immune
from prosecution, grotesque income inequality – regularly dominate the
televised debates that pitch him against Hillary Clinton, the latest of which
will be held in Brooklyn Thursday night.
In the past week, the question
of Wall Street reform has gained further prominence as the focus of the
presidential contest has swung to the home turf of the world’s financial
capital ahead of New York’s own primary vote on 19 April.
Unusually for New York, the
state, with its fat crop of 291 Democratic delegates out of the 2,382 needed to
win, is being fiercely fought over, and that in turn has pushed the question of
what to do with those pesky financiers and their high-risk gambles even further
up the political agenda.
It would be hard to overstate
the importance of Wall Street within the New York primary. More than half of
the active
Democratic voters likely to participate in the ballot live in New York
City, and within the boundaries of the five boroughs the financial services
industry accounts for almost one
in 10 private sector jobs and nearly a third of the payroll – equivalent to
a total of one million of New York City’s private sector jobs.
That doesn’t mean that all those
jobs and all that money are going to those titans of Wall Street who were in
the room with Frank. Much of the economic activity goes to relatively low-paid
service workers who support the financial sector, such as healthcare, food and
retail workers.
“Financial services form a big
voting bloc, but people who work at the lower end of the industry and in the
support services may well be Bernie fans,” said Paul Ryan, a fully signed-up
member of that elite club, Bankers for Bernie. Ryan, a managing director at
Tripoint Global Equities, an investment bank that works with small businesses,
believes that the physical presence of Wall Street and the ostentatious wealth
that flows from it through Manhattan provide ample evidence that Sanders’
radical policies are right.
“New Yorkers are particularly
well positioned to see how the rich are screwing over everybody else. You just
have to look at real estate prices – people will take a look at what’s
happening across the city and a certain number will be disgusted by it: Bernie
speaks to them,” he said.
Ryan said his work with
smaller companies, who continue to find it much harder to obtain finance than
big corporations in the wake of the 2008 crash, has set him apart from most of
his peers and made him more amenable to Sanders’ call for a Wall Street shake
up. “These past few years haven’t been good for my clients as nobody is talking
about meaningful policies to reinvigorate small business and manufacturing,” he
said.
Ryan admits there is an
element of self-interest in his support for Sanders in that his investment firm
depends on the financial health of its clients who are hurting. But he also
insists that his unusual position as a financier who wants to see major change
on Wall Street comes from something more fundamental in him: “Conscience. I
have a conscience. We have gone so far down the road of Reagan economics we’ve
ended up in downright cruelty. That’s why Bernie must win.”
In the case of Wade Black, COO
at the boutique investment banking firm Scarsdale Equities, it was the experience
of watching the financial world suffer serial convulsions that turned him into
a Banker for Bernie.
“I’m 42. In my relatively
short career on Wall Street, I’ve watched us lurch from crisis to crisis – from
the Mexican peso crisis of 1994, the dot-com bubble, post-9/11 – without
exactly learning our lesson.”
After all that, Black came to
the conclusion that “capitalism works better if we don’t have a class of banks
who take all the reward and none of the risk.” And like Ryan, he thinks the
fallout of that disparity is written all over New York city.
“Just look at the city and you
see the problem writ large. Income inequality in New York is huge – you just
have to walk around Queens and Brooklyn to see what’s going on. It’s
unsustainable.”
Asked to describe how he came
to feel the Bern, Black said that his anxieties about the industry in which he
has worked all his life grew out of his questioning of American politics. “I
developed a dissatisfaction with establishment politics,” he said, adding that
in 2012 he voted for neither Barack Obama nor his Republican challenger Mitt
Romney.
Then in 2014, Michael Lewis’
book Flash Boys: A Wall Street Revolt helped to “pull the scales from off my
eyes. It showed me that the regulatory structure was rigged and I could no
longer ignore that.”
Black said he did not mind Wall
Street becoming a target of Sanders’ invective. He’d continue supporting the
candidate, he speculated, “even to the extent that Bernie’s reforms meant I
lost my job”.
Though Sanders’ passionate
stance against the large and growing inequalities that are visible in New York
City may resonate with many Democratic voters in next week’s primary, the US
senator from Vermont still has an uphill struggle going into the vote. The most
recent poll from Monmouth University has Clinton ahead by 12 percentage
points, with 51% of likely Democratic voters in New York supporting her
compared with 39% for Sanders.
Patrick Murray, director of
the Monmouth University polling institute, said that there was still much to
play for as there were signs beneath the headline figures that Sanders’
criticisms of Wall Street were resonating with important New York voting blocs.
In particular, in upstate areas and rust-belt towns such as Buffalo and
Rochester, the decline in manufacturing and the ensuing economic woes spoke to
Sanders’ message.
“Sanders attracts young people
who are uncertain about their own future and fear they won’t do as well as
their parents did, as well as older white men who aren’t doing so well and are
plentiful in cities like Buffalo,” Murray said.
Clinton has tried to fend off
her rival’s attacks by stressing her dependability as a potential president who
could get things done, in contrast to what she has portrayed as Sanders’
flights of fancy. The approach on Wednesday won her the influential backing of
the liberal tabloid the New York Daily News, which earlier this month held an editorial
board interview with Sanders in which he appeared to struggle to answer
fairly basic questions about his Wall Street policies such as how he would
break up the biggest banks.
Later, Sanders put out a statement
in which he laid out his plan to break up “too big to fail” banks within the
first year of his administration, using the authority vested in the executive
by the post-2008 crash Dodd-Frank Act. But by then the damage had already been
already done. Announcing its endorsement of Clinton, the Daily News dismissed
Sanders as “a fantasist who’s at passionate war with reality” while praising
her as a politician who was “supremely knowledgeable about the powers a
president can wield to lift fortunes in need of lifting”.
Still, it is indisputable that
the unexpectedly potent campaign of a self-described democratic socialist who
has put Wall Street at the core of his critique of modern America has forced
Clinton to shift ground sharply to the left. She has come a long way from the
first lady who stood by President Bill Clinton’s side in 1999 as he signed into
law the repeal of Glass-Steagall regulations that in turn allowed investment
and commercial banks to fuse and unleashed, in the view of several erudite
economists, the reckless lending that would cause the Great Recession.
In her own Daily
News editorial board interview, published on Monday, Clinton went as far as
to agree with Sanders that Dodd-Frank gave the White House authority to break
up banks “that pose a grave threat to financial stability”. She promised that
as president she would appoint financial regulators who would be prepared to
make hard calls to prevent a repeat of 2008, as well as to empower and resource
prosecutors to press criminal charges if merited – a far cry from the 1990s.
Adam Green, cofounder of the
million-member advocacy organization Progressive Change Campaign Committee
(PCCC), said that ideas like breaking up too-big-to-fail banks were not long
ago on the margins of Democratic politics. “Now the center of gravity of the
Democratic party as it thinks about Wall Street has dramatically shifted and
both the candidates are talking about jailing bankers who break the law and
breaking up big institutions.”
For the Bankers for Bernie,
however, Clinton’s talk about toughening up the regulators and empowering
prosecutors doesn’t go far enough. He may be an investment banker himself, but
Ryan prefers Sanders’ pledge to begin breaking up the banks in his first 100
days in the White House over Clinton’s more indirect promises.
“She has a thousand talking
points, but when the lights are turned off and all the glare of the election
fades, politics-as-normal will return, the lobbyists will get to work, and
nothing at all will happen,” he said.
Frank, still speaking
anonymously, agrees. “Hillary Clinton is paying lip-service to Wall Street
changes. Maybe in her heart she means business, but for me income inequality is
the civil rights issue of our time, and I feel strongly we need a president who
is totally committed to making this happen.”
